Lovisa Holdings Ltd (ASX: LOV) is one ASX dividend stock set to deliver handsome returns to the patient investor, experts say.
It is also catching the eye of investors – not just for its share price growth (the stock is up 57% in the past year) but also for its solid dividend yield.
At Friday's close, Lovisa was trading at $32.82 per share, with a trailing dividend yield of 2.46%. With all franking credits, the fully grossed dividend yield is 3%.
Here's why brokers see it outpacing the ASX with growth and dividends moving forward.
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ASX dividend stock in favour
Lovisa is a fast-fashion jewellery retailer. It has rapidly expanded its global footprint in recent years.
And experts say with more than 850 stores across 30 countries, the company's growth story is far from over.
Wilsons Advisory labelled the stock as a top pick in a note to clients this week. Meanwhile, Morgans is also bullish on the ASX dividend stock.
It cites the company's strong balance sheet and potential for stellar investment returns. My colleague James voted it a stock to "own for 25 years".
The broker forecasts fully franked dividends of 80 cents per share in FY24, rising to 86 cents in F25.
It rates the ASX dividend stock a buy with a $37 per share price target, suggesting a 13% upside potential at the time of writing.
Including the forward yield on its dividend estimates and the upside potential, investors might be treated to a 15.6% total return.
Dividends for dessert, growth for mains
Beyond its dividends, analysts have lofty growth estimates for the ASX dividend stock. According to my colleague Tristan, UBS predicts the company could generate $81 million in net profit for FY24.
This marks a 19% increase year over year if it proves accurate.
But this growth is expected to accelerate. UBS projects 31% growth in net profit to $106 million in FY25.
It then projects a head-spinning 62% year-over-year growth to $172 million the following year. Such growth would more than double its earnings over the next four years, funding potential dividend increases.
The growth is underscored by new store openings. In H1 FY24, the ASX dividend stock added 53 net new stores to its network. More stores equals more sales and, ultimately, more earnings.
Foolish takeaway
The recent market volatility has created potential buying opportunities in many ASX dividend stocks.
Brokers think Lovisa's dividend yield, coupled with its growth prospects, could make it a candidate for long-term investment portfolios.
Whether it will dominate the ASX or not depends on many factors. Time will tell where it ends up.
With strong earnings growth and a solid expansion strategy, it's all up to management now to see convert on this momentum.
As always, remember to conduct your own due diligence.
